October 25, 2018

Increase Sales Reduce Cost - the basic business formula

PAGSASANAY SA TAGUMPAY

Reviving dead business
This was discussed on profitability portion of the orientation. This is high level discussion on business strategy,yet so simple in approach. This was contained in the book " Mind of the Strategist  which we earlier had.  (We could not find a copy anymore.)

1.  Ohmae was the first to advance the idea of 3cs of business:  company, competition and customer. Both the company and competitor give value to the customer. Competition between company and competitor is a cost.


2. The goal of every strategist is to increase sales and reduce cost and expenses. Reduce cost and expenses also increase sales.

     1.  Goods that are lower in cost sell more. Expensive goods do not sell well.

     2.  Saving expenses is marketing in reverse;  your savings in expense and cost is the equivalent of the
          gp of equivalent the goods sold.  You  do not have to sell much if you saved expenses

3. Business moves to where sales can be high and cost can be lower.  Lower cost means higher profit
    higher ROI

    Some strategies are discovered to increase ROI:

    1.  Sell back and leaseback options.   Assets are decreased  and therefore sales turn over increases
         in the Du Pont formula: (b Sales/Total Assets

              Net Income/sales    x  Sales/Total Assets    x   Total Assets/SHE

    2. Moving to low cost  tax environment areas are resorted to in offshoring, outsourcing (BPO)  where the
        costs are lower

    3. Automation reduces labor costs in small amount but the over all cost of doing business.

   
                                    Increase Sales
                                    Reduce Costs/Expenses

                                   Increase GP
                                                                                                               Can you increase
                                                                            Number of Units         1.  Awareness
                                                                                                              2.  Number of salesforce
                                                                                                              3.  Effectiveness
                                                                                                              4.  Ads/promo/awarness
                                                                                                              5.  Number of  channels
                                                                                                              6.  Geographical areas
                                                                                                              7.  Variants selection - new
                                                                                                                   products
                            Can sales be increased                                                                              

                                                                            Price                         1.  Sachet marketing (lower qty)
                                                                         

                                                                            Value                        1. Features
                                                                                                             2. Quality
                                                                                                             3.  Efficiency

                                                                            Uses                         1. Other uses
                                                                                                             2.  Other age groups users              
                            Can cost be reduced
                                                                   
                                                                       Materials                    1.  Substitute - plastic,
                                                                                                         2. Subcontracting

                                                                       Methods                     1.  Value engineering/analysis
                                                                                                     

                                                                      Labor                          1. Robotics
                                                                                                         2.  Cheap labor/low taxes
                                                                                                             environment
                                                                                                         3.  Reduce OT
                                                                                                         4. Planning

                                                                     OH                             1.  Reduce HO staff
                                                                                                        2.  Common use central facility

                                                                    Marketing                    1.  Direct Marketing WOM
                                                                                                        2.  Cobranding

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